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On Christmas day 2008...

...I'd like to share another Daily Reckoning from my friend Bill Bonner. UB

A very short reckoning today...
Not that there isn’t a lot to reckon with. Never have we seen so many absurdities...such remarkable events...such sublimely moronic thinking – in such a short time! When we want to make fun of something, we’re paralyzed...spoiled for choice.

It is amazing to us that so many people have so much faith in so much humbug.

We’re talking about the bailout...the fix...the save...the plan to revive the world economy by giving it more of what it least needs – more debt. The idea is to make the pain of the correction go away by encouraging people to act as though they had nothing to correct. They’ve borrowed too much. And they’ve spent too much. But the feds aim to make them borrow more – by bringing the cost of borrowing down to an all-time low – and make them spend more...by causing prices to rise. (When money loses its value...they’ll be glad to get rid of it.)

It’s a consumer economy, they say; all we’ve got to do is to lure people to consume. The simpletons.

Colleague Simone Wapler explains that it doesn’t work that way:
“Of course, a consumer economy requires consumption, but that’s not all it requires. Imagine an island where a fisherman, a hairdresser, a doctor and a central banker live. The fisherman sells his fish. The hairdresser cuts hair. And the doctor does whatever doctors do. They all live on their services, using shells for money. The population is stable; everybody does what he’s supposed to do. Everyone is fed. They all have nice haircuts. And they all get medical treatment. The number of shells is stable too. That’s all there is to the story.”
Simone goes on to explain that the only way people can get their hair cut two times a day...eat twice as many fish...or get sick more often and expect to get the same treatment they got before is by INCREASING PRODUCTION. And that requires saving...and investment. Otherwise, increasing consumption isn’t possible. Even if you add more shells, the productive capacity remains the same.

We don’t even know why we are pointing this out. Every fool knows it. But every fool also believes that if you mix in a little macro-economic mumbo jumbo that, somehow, central bankers can increase consumption by discouraging saving...and just getting more shells into consumers’ hands.
The whole thing is as preposterous as the bubble that went before it.
But that doesn’t make it unpopular!

And since it’s Christmas Eve...and since we’re waiting in the Limoges airport for our two daughters to arrive...
...and since we see them coming out now...
We’re going to sign off...
...wishing you a Merry Christmas, Happy Hanukah...Joyeuses Fetes...Feliz Navidad...Super Kwanza...whatever...
And since France Telecom seems to have cut off our phone service...we will not be able to reckon tomorrow...

When the one you love becomes a memory, that memory becomes a treasure.

Search "steady state economy" for more information on this alternative view of economics. It is an old concept and counter to the notion that the economy must grow to be healthy. Some might even call it a conservative approach to economics.